---

Manila

FIRST DIVISION

[ G.R. No. 262092, October 09, 2024 ]

COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. ESTATE OF MR. CHARLES MARVIN ROMIG, REPRESENTED BY ITS SOLE HEIR MRS. MARICEL NARCISO ROMIG, RESPONDENT.

D E C I S I O N

HERNANDO, J.:

Before the Court is a Petition for Review on Certiorari1 filed by the Commissioner of Internal Revenue (CIR), through the Office of the Solicitor General, assailing the Decision2 dated October 28, 2021 and the Resolution3 dated July 19, 2022, of the Court of Tax Appeals (CTA) En Banc in CTA EB No. 2214, which affirmed the Decision4 dated September 2, 2019 and the Resolution5 dated December 27, 2019, of the CTA Second Division in CTA Case No. 9626.

The Facts

Charles Marvin Romig (Romig) was an American national who died intestate in the Philippines on November 20, 2011. At the time of his death, Romig was a resident of Aguada, Poblacion, Puerto Galera, Oriental Mindoro.6

On March 13, 2012, Maricel Narciso Romig (Maricel), the decedent's sole heir and representative of the Estate of Mr. Romig (Estate), executed an Affidavit of Self-Adjudication, adjudicating to herself the properties of the decedent at the time of his death, including a dollar deposit at the Foreign Currency Deposit Unit (FCDU) of Hongkong and Shanghai Banking Corporation (HSBC) Limited, HSBC Premiere-Makati Branch (HSBC USD Savings Account).7

On May 18, 2012, the Estate filed an Estate Tax Return and paid the estate tax due thereon amounting to PHP 26,152.00. On even date, the Estate submitted a letter to the Law and Legislative Division of the Bureau of Internal Revenue (BIR) National Office requesting for a confirmatory ruling that the HSBC USD Savings Account is exempt from estate tax and all other taxes, in accordance with Section 6 of Republic Act No. 6426, as amended by Presidential Decree Nos. 1034 and 1035, otherwise known as the Foreign Currency Deposit Act of the Philippines.8

On June 30, 2015, the Estate filed an Amended Estate Tax Return and paid additional estate tax on the HSBC USD Savings Account amounting to PHP 4,565,349.07.9

On June 28, 2017, at 8:00 a.m., the Estate filed before the Bureau of Internal Revenue (BIR) an administrative claim for refund of erroneously paid estate tax amounting to PHP 4,565,349.07, including interests and penalties, on the HSBC USD Savings Account.10 On even date, at 4:47 p.m., the Estate also filed before the CTA a Petition for Review, which was initially raffled to the First Division, in view of the two-year statute of limitations under Section 229 of the 1997 National Internal Revenue Code (1997 NIRC).11

In its Answer,12 the CIR interposed the following defenses:

1) The Estate is not entitled to the refund of the alleged payment of estate tax for the transfer of the foreign currency deposits of the heir of Romig;

2) The decedent is an American citizen but a resident of the Philippines. Hence, all the properties of the decedent wherever situated is subject to estate tax;

3) Given that a foreign currency deposit of a resident decedent is not among those enumerated as allowable deductions from the gross estate under Section 86(A) of the 1997 NIRC, such should be subject to estate tax;

4) The alleged exemption under Section 6 of the Foreign Currency Deposit Act interposed by the Estate is not among those enumerated under Section 87 of the 1997 NIRC as exempted from estate tax; and

5) The Petition should be dismissed for failure on the part of the Estate to exhaust administrative proceedings.13

The pre-trial conference was held on February 8, 2018. The parties then filed their Joint Stipulation of Facts and Issues on February 28, 2018. Thereafter, the CTA First Division issued a Pre-Trial Order on May 7, 2018.14

During trial, the Estate presented Maricel as its witness. Subsequently, the Estate filed its Formal Offer of Evidence (with Motion to Recall Witness) on June 8, 2018. The CTA First Division granted the Motion to Recall Witness in its Resolution dated August 6, 2018, and Maricel was recalled to the witness stand. On September 11, 2018, the Estate filed its Supplemental Formal Offer of Evidence.15

On September 25, 2018, the case was transferred to the CTA Second Division. Thereafter, it admitted all of the Estate's exhibits and declared the same to have rested its case on November 21, 2018.16

During the hearing on January 21, 2019, the CIR manifested that there was no report of investigation on the Estate's claim for refund. Thus, the CTA Second Division ordered both parties to submit their respective Memoranda.17

The case was then submitted for decision on April 8, 2019, after the filing of the CIR's Memorandum on February 21, 2019 and respondent's Memorandum on March 22, 2019.18

Ruling of the CTA Second Division

In its Decision19 dated September 2, 2019, the CTA Second Division granted the Estate's Petition for Review and ordered the CIR to refund or issue a Tax Credit Certificate in favor of the Estate in the amount of PHP 4,565,349.07. The dispositive portion of the Decision reads:

WHEREFORE, premises considered, the instant Petition for Review is hereby GRANTED. Accordingly, [the Commissioner of Internal Revenue] is ordered to REFUND[,] or in the alternative, ISSUE A TAX CREDIT CERTIFICATE in favor of [the Estate of Mr. Charles Marvin Romig, represented by its sole heir, Mrs. Maricel Narciso Romig] in the amount of [PHP] 4,565,349.07, representing erroneously paid estate tax, including interest and penalties, on petitioner's foreign currency deposit with HSBC.

SO ORDERED.20 (Emphasis in the original)

According to the CTA Second Division, the Estate is entitled to a refund of erroneously paid estate tax given that: (1) the Estate filed its administrative and judicial claims for refund within the two-year period provided under the 1997 NIRC;21 and (2) the tax exemption of foreign currency deposits under Section 6 of Republic Act No. 6426, as amended, has not been revoked by the 1997 NIRC.22

It held that between the provisions of Republic Act No. 6426, a special law that took effect in 1972, and the provisions of the 1997 NIRC, a general law on national internal revenue taxes, the former necessarily prevails.23 This is in keeping with the rule on statutory construction that a later law, general in terms and not expressly repealing or amending a prior special law, will not ordinarily affect the special provisions of the earlier statute.24 Consequently, the CTA Second Division ruled that the Estate can claim for a refund on the estate tax since Republic Act No. 6426 is the governing law on the exemption from estate tax of foreign currency deposits.25

The CIR moved for reconsideration but the same was denied by the CTA Second Division in its Resolution26 dated December 27, 2019 for lack of merit.27

Aggrieved, the CIR appealed before the CTA En Banc.

Ruling of the CTA En Banc

In its Decision28 dated October 28, 2021, the CTA En Banc effectively affirmed the ruling of the CTA Second Division considering that the required vote for the En Banc to reverse a Division decision was not obtained, pursuant to Section 2 of Republic Act No. 1125, as amended by Republic Act No. 9503, in relation to Section 3, Rule 2 of the Revised Rules of the CTA (RRCTA). The dispositive portion of the CTA En Banc Decision reads:

WHEREFORE, considering that the required affirmative votes of five (5) members of the Court En Banc was not obtained in the instant case, pursuant to Section 2 of RA No. 1125, as amended by RA No. 9503 in relation to Section 3 of Rule 2 of the RRCTA, the Petition for Review filed by the CIR is DENIED and the Decision of the Court in Division promulgated on September 2, 2019 and the Resolution dated December 27, 2019 are deemed AFFIRMED.(awÞhi(

Accordingly, respondent's claim for refund in the amount of PHP 4,565,349.07 representing erroneously paid estate taxes of the estate of Charles Marvin Romig is GRANTED.

SO ORDERED.29 (Emphasis in the original)

While the CTA En Banc agreed with the CTA Second Division that the Estate duly filed its administrative and judicial claims for refund within the two­-year period counted from the date of payment of tax,30 it nevertheless held that the HSBC USD Savings Account is not exempt from estate tax.31 It ruled that respondent's reliance on Republic Act No. 6426 for the exemption on estate tax is misplaced because the said law pertains to income tax, which is separate and distinct from estate tax.32 The CTA En Banc concluded that "there was no erroneous payment of estate taxes and that the foreign currency deposit of the decedent was correctly and legally included in the latter's net estate subject to estate tax, hence, the instant claim for refund in the amount of PHP 4,565,349.07 should be denied."33

However, since only three Associate Justices concurred with the opinion of the ponencia during the deliberations of the case, the CTA Second Division's rulings stood affirmed.34

Dissatisfied with the Decision of the CTA En Banc, the CIR filed a Motion for Reconsideration.35

In its Resolution36 dated July 19, 2022, the CTA En Banc reiterated that the Estate satisfied the requirements to recover erroneously paid or illegally collected estate tax within two years from the payment thereof under Sections 204 and 229 of the 1997 NIRC.37 However, it then proceeded to rule that Republic Act No. 6426 remains the governing law on the exemption from estate tax of foreign currency deposits. The CTA En Banc concurred with the CTA Second Division's finding that the provisions of the 1997 NIRC, as amended, which is the general law on national internal revenue taxes, cannot impliedly repeal Republic Act No. 6426, a special law, which governs the foreign currency deposit system in the Philippines.38 Consequently, the CTA En Banc held that the Estate had the right to recover the amount of PHP 4,565,349.07 representing estate tax, including interest and penalties, that it had erroneously paid to the government.39

Hence, the instant Petition.

Issues

The main issues for this Court's resolution are: (1) whether the Estate complied with the two-year period under the 1997 NIRC to file its administrative and judicial claims for refund of erroneously paid estate tax; and (2) whether the decedent's foreign currency deposit with HSBC is exempt from estate tax.

Our Ruling

The Petition is without merit.

Respondent satisfied the two-year period requirement under the 1997 NIRC upon which to file its administrative and judicial claims for refund of erroneously paid tax

In the present Petition, the CIR insists that respondent's claim for refund of the estate tax that the latter had previously paid should be denied for failure to exhaust administrative remedies.40 According to the CIR, the Estate's filing of its administrative claim with the BIR at 8:00 a.m. and its judicial claim before the CTA at 4:47 p.m. both on June 28, 2017 – just two days prior the lapse of the two-year period, deprived the BIR the opportunity to act on the administrative claim for refund. The CIR argues that, with less than nine hours given to him, he was not "afforded a complete chance to pass upon the matter" nor "given an opportunity to act and correct the errors committed in the administrative forum."41

The contention is untenable.

Sections 204 and 229 of the 1997 NIRC provide for the refund of erroneously or illegally collected taxes. Section 204 applies to administrative claims for refund, while Section 229 to judicial claims for refund. Said provisions state:

SECTION 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. — The Commissioner may —

. . . .

(c) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund.

SECTION 229. Recovery of Tax Erroneously or Illegally Collected. — No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment. Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid.

Based on the above-quoted provisions, it is manifestly clear that an administrative claim for refund must precede the filing of a judicial claim and that both claims must be filed within the two years from the payment of the tax. In the instant case, the two-year period to file a claim for refund is reckoned from June 30, 2015, the date respondent paid the estate tax amounting to PHP 4,565,439.07. Since the Estate first filed its administrative claim at 8:00 a.m. on June 28, 2017, and thereafter its judicial claim at 4:47 p.m. on even date, both claims were filed on time or within the two-year prescriptive period provided by law.

It is of no moment that there is only a short interval between the filing of the two claims. The law merely requires that both claims are filed within the two-year period. In Commissioner of Internal Revenue v. Carrier Air Conditioning Philippines, Inc.,42 where therein petitioner similarly argued that the judicial claim for refund, which was filed barely 10 days from the filing of the administrative claim, was premature and violative of the doctrine of exhaustion of administrative remedies, this Court held that, "from the plain language of the law, it does not matter how far apart the administrative and judicial claims were filed, or whether the [CIR] was actually able to rule on the administrative claim, so long as both claims were filed within the two-year prescriptive period."43

Moreover, the Court agrees with the finding of the CTA Second Division and CTA En Banc that the Estate's immediate resort to court action was justified, considering that the prescriptive period was about to expire. Under the circumstances, if the Estate had waited for the CIR to act on its administrative claim knowing fully well that the two-year period was about to lapse, it would have resultantly forfeited its right to seek judicial recourse, thereby suffering irreparable damage.44 Hence, respondent cannot be faulted for acting in such a manner to protect its interest and right to recover the taxes it erroneously paid to the government.45

While the Court recognizes that the CIR may not have had the proper chance to act on the matter within their jurisdiction because of the short period of time between the filing of the two claims, the silence or insufficiency in the law on what is to be considered a reasonable period for the CIR to resolve a claim for refund of taxes is one that can be addressed not by judicial pronouncement, but by appropriate legislation.46

Given the foregoing, as the law simply provides two years for a taxpayer to file both the administrative and judicial claims to recover erroneously or illegally collected tax, with the former required to be filed first, the Estate sufficiently complied with such requirements when it filed its administrative claim at 8:00 a.m. and its judicial claim at 4:47 p.m. on June 28, 2017, or two days before the two-year period was set to expire. 

The decedent's HSBC USD Savings Account is exempt from estate tax pursuant to Republic Act No. 6426, as amended.

Anent the second issue, the CIR claims that Romig's HSBC USD Savings Account is subject to estate tax because it is not an allowable deduction under Section 86(A) of the 1997 NIRC nor is it among the acquisitions and transmissions which are not subject to estate tax under Section 87 of the same Code. Further, the CIR posits that the tax exemption of FCDUs under Section 6 of Republic Act No. 6426 was revoked upon the enactment of the 1997 NIRC, as amended.47

For its part, the Estate counters that there is nothing in the 1997 NIRC that explicitly revokes the tax exemption found in Section 6 of Republic Act No. 6426. It argues that Republic Act No. 6426, being a special law, could not have been impliedly repealed by the 1997 NIRC, given that the latter is a general law that merely provides for a general repealing clause.48

The Court finds the argument of the Estate meritorious.

Republic Act No. 6426 is a special law created particularly for foreign currency deposits in the Philippines, with the goal of attracting deposits from foreign lenders and investors.49 Pertinently, Section 6 thereof states:

Section 6. Tax Exemption. – All foreign currency deposits made under this Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034, including interest and all other income or earnings of such deposits, are hereby exempted from any and all taxes whatsoever irrespective of whether or not these deposits are made by residents or non-residents so long as the deposits are eligible or allowed under aforementioned laws and, in the case of non-residents, irrespective of whether or not they are engaged in trade or business in the Philippines. (As amended by Presidential Decree No. 1246, prom. November 21, 1977.) (Emphasis supplied)

Prior to its passage in 1972, one of the country's main economic challenges was the unstable financial condition caused by heavy dollar spending, which resulted in a dollar deficit. To address this problem and to likewise increase the country's reserves, the government encouraged foreign currency deposits in duly authorized banks in order that these may be put into the stream of the banking system. Towards this end, Republic Act No. 6426 provided tax exemptions and incentives to FCDU deposits, as well as banks and financial institutions having FCDU license.50

Meanwhile, the 1997 NIRC is a general law that governs the imposition of national internal revenue taxes, fees, and charges.51 Among the taxes imposed by the 1997 NIRC is estate tax, which is a tax on the right of a decedent to transmit his or her estate to the lawful heirs and beneficiaries at the time of death. Under Sections 84 and 85, estate tax shall be levied, assessed, collected, and paid upon the transfer of the net estate of every decedent, whether resident or non-resident of the Philippines, based on the value of such net estate, by including the value at the time of the decedent's death of all property, real or personal, tangible or intangible, wherever situated.52

It is a fundamental rule in statutory construction that between a general law and a special law, the latter prevails because a special law reveals the legislative intent more clearly than a general law does.53 Moreover, a special law cannot be repealed or modified by a subsequently enacted general law in the absence of any express provision in the latter law to that effect. A special law must be interpreted to constitute an exception to the general law in the absence of special circumstances warranting a contrary conclusion.54

A perusal of the provisions of the 1997 NIRC would reveal that there is no express repeal of the grant of tax exemption for foreign currency deposits found in Republic Act No. 6426. Its repealing provision merely provides:

TITLE XIII
REPEALING PROVISIONS

Section 291. In General. - All laws, decrees, executive orders, rules and regulations or parts thereof which are contrary to or inconsistent with this Code are hereby repealed, amended or modified accordingly.

Based on the foregoing, it then becomes apparent that the decedent's HSBC USD Savings Account is governed by the provisions of Republic Act No. 6426 and is therefore exempt from any and all taxes, including estate tax. Hence, the Court upholds the ruling of the CTA En Banc that the Estate has the right to recover the amount of PHP 4,565,349.07 representing the estate tax that it had erroneously paid to the government.55

ACCORDINGLY, the instant Petition for Review on Certiorari is DENIED. The Decision dated October 28, 2021 and the Resolution dated July 19, 2022 of the Court of Tax Appeals En Banc in CTA EB No. 2214, which affirmed the Decision dated September 2, 2019 and the Resolution dated December 27, 2019, of the CTA Second Division in CTA Case No. 9626, are AFFIRMED.

SO ORDERED.

Gesmundo, C.J. (Chairperson), Zalameda, and Marquez, JJ., concur.
Rosario,* J., on official business.

---

Footnotes

* On official business.

1 Rollo, pp. 10-42.

2 Id. at 51-72. The October 28, 2021 Decision in CTA EB No. 2214 was penned by Associate Justice Catherine T. Manahan and concurred in by Presiding Justice Roman G. Del Rosario, Associate Justices Juanito C. Castañeda, Jr., Erlinda P. Uy, Ma. Belen M. Ringpis-Liban, Jean Marie A. Bacorro-Villena, Maria Rowena Modesto-San Pedro, and Marian Ivy F. Reyes-Fajardo, En Banc, Court of Tax Appeals, Quezon City.

3 Id. at 78-86. The July 19, 2022 Resolution in CTA EB No. 2214 was penned by Associate Justice Marian Ivy F. Reyes-Fajardo and concurred in by Presiding Justice Roman G. Del Rosario, Associate Justices Erlinda P. Uy (joined the Dissenting Opinion of Associate Justice Maria Rowena Modesto-San Pedro), Ma. Belen M. Ringpis-Liban, Jean Marie A. Bacorro-Villena, Maria Rowena Modesto-San Pedro (with Dissenting Opinion), and Lanee S. Cui-David (with Dissenting Opinion), En Banc, Court of Tax Appeals, Quezon City.

4 Id. at 122-139. The September 2, 2019 Decision in CTA Case No. 9626 was penned by Associate Justice Cielito N. Mindaro-Grulla and concurred in by Associate Justices Juanito C. Castañeda, Jr. and Jean Marie A. Bacorro-Villena, of the Second Division, Court of Tax Appeals, Quezon City.

5 Id. at 142-147. The December 27, 2019 Decision in CTA Case No. 9626 was penned by Associate Justice Cielito N. Mindaro-Grulla and concurred in by Associate Justices Juanito C. Castañeda, Jr. and Jean Marie A. Bacorro-Villena, of the Second Division, Court of Tax Appeals, Quezon City.

6 Id. at 53.

7 Id.

8 Id. Republic Act No. 6426, Sec. 6, as amended, states: "Section 6. Tax exemption. – All foreign currency deposits made under this Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034, including interest and all other income or earnings of such deposits, are hereby exempted from any and all taxes whatsoever irrespective of whether or not these deposits are made by residents or non-residents so long as the deposits are eligible or allowed under aforementioned laws and, in the case of non-residents, irrespective of whether or not they are engaged in trade or business in the Philippines."

9 Id.

10 Id.

11 Id. at 53-54.

12 Id. at 54.

13 Id.

14 Id.

15 Id.

16 Id. at 55.

17 Id.

18 Id.

19 Id. at 122-139.

20 Id. at 139.

21 Id. at 133.

22 Id. at 135-136.

23 Id.

24 Id. at 134.

25 Id. at 146.

26 Id. at 142-147.

27 Id. at 145-146.

28 Id. at 51-72.

29 Id. at 71.

30 Id. at 61-62.

31 Id. at 69.

32 Id.

33 Id. at 70.

34 Id. at 70-71.

35 Id. at 101-119.

36 Id. at 78-86.

37 Id. at 81.

38 Id. at 84.

39 Id. at 85.

40 Id. at 37-38.

41 Id. at 39.

42 G.R. No. 226592, July 27, 2021 [Per J. Leonen, En Banc].

43 Id.

44 Rollo, pp. 62 and 133.

45 Commissioner of Internal Revenue v. Univation Motor Philippines, Inc. (Formerly Nissan Motor Philippines, Inc.), 851 Phil. 1078, 1086 (2019) [Per J. Reyes, J., Jr., Second Division].

46 Commissioner of Internal Revenue v. Carrier Air Conditioning Philippines, Inc., G.R. No. 226592, July 27, 2021 [Per J. Leonen, En Banc].

47 Rollo, p. 82.

48 Id.

49 Government Service Insurance System v. Court of Appeals, 666 Phil. 656, 670 (2011) [Per J. Perez, First Division].

50 Department of Finance v. Asia United Bank, G.R. Nos. 240163 & 240168-69, December 1, 2021 [J. Zalameda, Third Division].

51 Power Sector Assets and Liabilities Management Corporation v. Commissioner of Internal Revenue, 815 Phil. 966, 1002 (2017) [Per. J. Carpio, En Banc].

52 The pre-TRAIN Law provisions of the 1997 NIRC, as amended, shall apply in the present case because the decedent died on November 20, 2011.

53 Commissioner of Internal Revenue v. Bases Convention and Development Authority, 868 Phil. 567, 581 (2020) [Per J. Lazaro-Javier, First Division], citing Commissioner of Internal Revenue v. Semirara Mining Corporation, 844 Phil. 755, 763 (2018) [Per J. Reyes, A., Jr., Second Division].

54 Id.

55 Rollo, p. 85.

The Lawphil Project - Arellano Law Foundation

---